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On forward induction in money-burning games

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Author Info

  • Makoto Shimoji

    ()
    (Faculty of Economics, Yokohama National University, Yokohama, Kanagawa 240-8501, JAPAN)

Abstract

We first consider money-burning games studied by Ben-Porath and Dekel [6]. We show that iterative weak dominance and extensive form rationalizability yield the same unique outcome in this class of games. This result suggests that weak dominance captures the forward induction logic implied by extenisve form rationalizability. Next, we consider an example of entry model by Arvan [1] to demonstrate the power of forward induction. In this example, despite the presence of multiple equilibria, forward induction chooses a unique outcome.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 19 (2002)
Issue (Month): 3 ()
Pages: 637-648

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Handle: RePEc:spr:joecth:v:19:y:2002:i:3:p:637-648

Note: Received: January 25, 2000; revised version: January 5, 2001
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Related research

Keywords: Conditional dominance; Rationalizability; Weak dominance; Forward induction; Money-burning games.;

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Cited by:
  1. Souza, Filipe & RĂªgo, Leandro, 2012. "Mixed Equilibrium: When Burning Money is Rational," MPRA Paper 43410, University Library of Munich, Germany.

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